The Second Circuit Court of Appeals, in Manhattan, recently overturned a lower-court ruling that unpaid interns were actually employees subject to the minimum wage and overtime requirements of the Fair Labor Standards Act and New York Labor Law. In Glatt v. Fox Searchlight Pictures, Inc., 2015 U.S. App. LEXIS 11435 (2d Cir. July 2, 2015), the appellate court set out a new less rigid, more employer-friendly test; namely “whether the intern or the employer is the primary beneficiary of the relationship.” According to the Second Circuit, courts should now analyze the following seven factors to determine whether it is the intern or the employer that is the “primary beneficiary” of the internship, and thus whether the “internship” is in fact an employment relationship for which compensation must be paid:

 

(1)        The extent to which the intern and the employer clearly understand that there is no expectation of compensation;

(2)        The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern;

(3)        The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship;

(4)        The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions;

(5)        The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit;

(6)        The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar; and

(7)        The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning;